What Exactly is Wealth Management?

Many people have heard the term Wealth Management, but no one has truly stopped to think what does this actually mean. The word is thrown around boardrooms and in trades and it was peppered through financial articles about how to maximize your money and investments. Still no one thoroughly explained what wealth management really is. Is it simply managing my wealth? Do I make enough wealth for it to be managed? Why shouldn’t I just use an investment banker? Well the answer is a bit more nuanced.

Wealth management is different depending on the perspective. That is to say for the affluent individual wealth management is the science and process that is used to solve and increase his or her financial situation. This individual trusts a financial adviser to look at their situation and come up with a plan to manage it that will ultimately result in a better situation than the one that they started with.

From the financial advisor’s perspective wealth management looks different. It’s the ability to look at and understand a client’s financial situation. After understanding the situation, they utilize a full range of financial services and products to put together a plan that works to improve the finances of the affluent individual. From there they consult with the client to deliver their recommendations and plans. The process from the perspective of the financial advisor is consultative. The entire process revolves around the client. The objective is to understand the person they’re dealing with and find out the necessary information like what is important. After the wealth manager understands the client, they can then begin to make informed plans and recommendations. This involves bringing in the necessary experts and financial products to bring about the desired outcome.

The All Inclusive Wealth Management Definition

So if you had to come up with one overarching definition for wealth management it is:

The complete consultative process of understanding and meeting the needs of affluent clients and using that understanding to develop strategic plans, coordinate the right experts, and utilize the right products to grow, protect, and spread one’s wealth.

Important to note is that this definition only applies to those that can afford to use the service. For the vast majority of U.S. households, this service is too expensive.  As a result, it would make more sense for them to look into other solutions. Prioritizing personal finance strategies would be more applicable to their level of wealth.

So Why Not Just Use Investment Banking?

While there is some overlap between investment banking and wealth management,they are not the same thing. Investment banking is a specific vertical of banking that focuses on creating capital for business entities. Like investment banking, wealth management also deals with investments and growing wealth. Wealth management, though, looks to do this for an affluent individual and not a company. So if you’re a high net-worth individual, wealth management is the service that would apply to you.

To wrap it all up, the term wealth management appears in conversation often. The thing to remember is that this is a consultative process that seeks to protect, grow and spread wealth for the individuals that can afford the service. A wealth manager is an individual that will work to understand the individual client and use that understanding and pair it with a suite of financial products to achieve the desired goal.